A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of B++ (Good) and issuer credit ratings (ICR) of “bbb+” of Triple-S Salud, Inc. (TSS) and Triple-S Vida, Inc. (TSV). A.M. Best also has revised the outlook to positive from stable and affirmed the ICR of “bb+” of the holding company, Triple-S Management Corporation (TSM) [NYSE: GTS].
Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Triple-S Propiedad, Inc. (TSP). The outlook for these ratings is stable. All companies are domiciled in San Juan, PR.
The revised outlook reflects TSS and TSV’s strong foothold in government-sponsored health insurance operations, sustained competitive positioning in commercial group business and strengthened risk-based capital position. The TSM organization continues its pursuit of a careful business expansion and diversification strategy that includes the acquisition of complementary provider services while raising its percentage of revenue between its members, providers and employer groups. TSV provides life insurance and other ancillary services, which complements the brand and enhances product diversification objectives of the organization. For TSV, risk-adjusted capital has been solid over the last five years, reflecting a favorable earnings trend and includes the distribution of interest payments on its surplus notes. The ratings also reflect TSP’s excellent capitalization, solid operating profitability, which has benefitted from favorable reserve development over the long term, and a strong market presence within Puerto Rico.
Partially offsetting TSS’ positive rating factors is the potential for goodwill impairment and capital strain as a consequence of its purchase of Socios Mayores en Salud Holdings. There also is the potential for integration risk associated with American Health Inc. TSS is exposed to strong business concentration risk with respect to the organization’s significant participation in the government business sector. Statistically, Puerto Rico’s economy has worsened over the last five years; however, TSS reported increased earnings and maintained consistent return-on-revenue scores, despite the tough economic environment. TSV expanded into annuity products and continues to maintain a high percentage of surplus notes in the construction of its capital balance.
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